Three ways bitcoin is like Bangladesh

A few weeks ago, I visited Bangladesh in search of investment opportunities for my International Capitalist subscribers.

I quickly learned that in the South Asian country, anything goes… who you know matters… and there’s a lot of investment potential.

If you think about it, it’s a lot like bitcoin…

Almost anything goes

My friend Asif owns an apartment in the center of Dhaka, the capital of Bangladesh. Asif has a small farm on the roof. Chickens, pigs, you name it.

“Can you do that?” I naively asked him when I was at his place a few weeks ago. I live in Singapore, one of the more “follow the rules or else” countries in the world.

Asif laughed. “Why not?”

A lot of things are of the “do what you want” nature in Bangladesh.

Hang out there a while and it won’t be long before you come across a guy who has two wives. Want a pill? Drop by the local pharmacy: No prescription necessary, so self-medicating is standard. (Just be careful of those counterfeit drugs…they won’t help you much.) Need a shirt ironed late on a holiday evening? Insist and the hotel doorman will come up to do it for you.

One of the many advantages of bitcoin is that it also doesn’t adhere to the normal rules of money.. For example, if I want to send you bitcoin, it’s simple. It takes three minutes and it’s seamless, safe, easy and ridiculously cheap. And it’s about a million times quicker, easier and cheaper than trying to send you money via a wire transfer. (There’s a very good reason that the world’s biggest banks are terrified of blockchain, the technology that underpins cryptocurrencies.)

I can send bitcoin to anyone (as long as I have their account number) almost instantaneously. And I don’t need the approval of some poor bank drone in a cubicle somewhere. I can just do it.

That’s partly why bitcoin has the reputation – amongst people who don’t know better – of being a playground for criminals and drug traffickers. But that’s actually not the case. With bitcoin, every single transaction is tracked on something that’s kind of like a big Excel spreadsheet (see our blockchain primer here for all the details).

Still, bitcoin is becoming more regulated – though in a more libertarian, self-regulating way than today’s banking system allows. So it’s not quite as “anything goes” as Bangladesh.

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Who you know matters

One of the biggest drawbacks to Bangladesh is the ease of doing business there. For example, the World Bank’s Ease of Doing Business survey says that Bangladesh is the 187th-most difficult place (out of 190 countries) to get electricity… and that it takes on average 404 days to get hooked up to the grid. (Part of the problem might be that a normal power line in Dhaka looks something like the below… rat nests are tidy by comparison.)

But maybe the World Bank people just didn’t know who to talk to. They should have gone to the Dhaka Club, an old British colonial throwback that feels like it’s stuck in the 1950s. It’s a place where the billiards tables – bigger than two king beds so there’s a lot of green – each have their own attendant ready to help you out with strategy or hand you the bridge.

It’s also where Bangladesh’s wealthiest and best-connected citizens hang out. If you were born to the right family, went to the right school, spent years in the west and often sink balls at the Dhaka Club, you can easily get in touch with the right person to turn on your power in a lot less than 404 days – or do anything else you need.

What does this have to do with bitcoin?

In the world of cryptocurrencies – which is still very small – who you know matters. And because cryptocurrencies are still so new, there are a lot of charlatans out there. (When even Paris Hilton gets in on it, you know you have to tread carefully.)

During the 1999-2001 dot-com boom, any company that added “.com” to its name and professed to have an internet strategy could sit back and watch its share price quintuple… and today, anyone who can boast of a whitepaper can try to launch his own initial coin offering (ICO). So… knowing who’s real and who’s not is essential.

It’s still new… and the profit potential is huge

Bangladesh is still in its early days of entering the global financial infrastructure. Even though it has 165 million people – that’s like 22 Hong Kongs… three South Koreas… of more than four Californias – there are no international investment banks there (and only two retail banks with names that you’d recognise)… and no McDonald’s or Starbucks.

Yes, GDP per capita in Bangladesh, at US$1,360/year (compared to US$57,467 in the U.S.), is low, and you sometimes have to step around legless beggars sprawled out on the sidewalk.

Yet, the total value of all cryptocurrencies is around US$160 billion. That’s up from almost nothing five years ago. But it’s still less than half of the cash that Apple holds on its balance sheet. (Put another way, it’s also less than the GDP of Bangladesh…. And about the size of the economy of the U.S. state of Kansas.)

If cryptocurrencies achieve only a small fraction of their extraordinary potential in the coming years, they’re going to be worth many times what they are today. That’s why we believe everyone should own some cryptocurrencies today.

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Good investing,

Kim IskyanPublisher, Stansberry Churchouse Research

About Kim Iskyan

Kim Iskyan has nearly 25 years of experience as a stock analyst, hedge fund manager, political risk consultant, and financial commentator in more than half a dozen emerging and frontier markets.

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